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George and James are forming the GJ Partnership. George contributes $600,000 cash and James contributes nondepreciable property with an adjusted basis of $400,000 and a fair market value of $750,000. The property is subject to a $150,000 liability, which is alsotransferred into the partnership and is shared equally by the partners for basis purposes. George and James share in all partnership profits equally except for any precontribution gain, which must be allocated according to the statutory rules for built-in gain allocations.a.What is James’s adjusted tax basis for his partnership interest immediately after the partnership is formed?b.What is the partnership’s adjusted basis for the property contributed by James?c.If the partnership sells the property contributed by James for $800,000, how is the tax gain allocated between the partners?Page 6of 7
Cassandra is a 10% limited partner in C&C, Ltd. Her basis in the partnership is $60,000 andshe has an at risk investment of $30,000. She also has a passive income from another investment of $20,000. Cassandra allocated share of C & C loss for the year is $80,000.How much of the loss from C&C may Cassandra deduct? Page 7of 7